One of the most pressing challenges facing today's executives is keeping their best people. In today's knowledge and service based economy, companies differentiate themselves by their talentthe people with specialized skills and knowledge who walk through their doors every morning, and walk out every night. Given that new products and innovative strategies can be quickly copied by competitors, an organization's only source of sustainable competitive advantage is its human capital.

Many factors are making employee retention more important than ever. For instance, much is being written about the "graying of the workforce, with many Baby Boomers now entering their sixties and thinking about possible career transitions. The generation following on the Boomers' heels is widely acknowledged to be both smaller in size and often less skilled. Given the increasing technological complexity of most jobs, and the importance of specialized skills and deep industry knowledge, this "skills gap is expected to widen in the future.


A New Psychological Contract

These demographic and industry-based issues are exacerbated by a significant, overarching factor: a fundamental change in the relationship between employers and employees, what organizational psychologists often refer to as the "psychological contract. Professionals across generations understand that in today's ultra-competitive and global business environment, employees have many choices. Though companies still value loyalty, individual performance is where the "rubber meets the roadand even top performers are subject to unexpected layoffs. In his book "The Disposable American: Layoffs and Their Consequences, author Louis Uchitelle reports that over 30 million people have lost their jobs since the 1980's. The resultant shift in the "psychological contract affects a change in workers' emotions, expectations and attitudes surrounding the world of work, especially among younger generations, that makes it all the harder for companies to hold onto their best talent. So what can companies do to retain their key people?

1. Hire the Right People in the First Place
It sounds obvious, but in reality, many companies neglect this crucial first step. One way to cut turnover is to hire the right people the first time around. Start with a thorough and realistic analysis of what the different roles in your organization truly require with regard to knowledge, skills and abilities (KSA's). After completing the job analysis, rigorously assess your prospective employees to find out whether the job, team and corporate culture you are offering are likely to meet their needs and tap into their strengths.

2. Focus on the Individual
Recent research in the area of transformational leadership indicates that effective leaders provide their employees with "individualized consideration, eschewing a "one-size-fits-all approach to employee motivation and instead providing each employee with unique guidance. Schedule frequent check-ins with each employee, keep the lines of communication open, give plenty of personal feedback, and make sure that their original positions are still energizing them. Behavioral assessments that yield insights into an employee's natural strengths, needs and drives can be very valuable tools. For example, if your top sales rep highly values autonomy and independence, can you reduce the number of times per month that she needs to meet with her sales manager? Top performers are less likely to flee if they feel that they are truly valued as individuals.

3. Work the Data
Get into the habit of reviewing turnover rates on a quarterly basis. If the numbers are high or creeping up, dig deeper, putting to use all of the data that modern organizations typically track. Examine both "internal and "external drivers of turnover. Internal drivers refer to characteristics of employees themselves, such as their personality, intelligence, educational background, experience, job performance and promotion history. External drivers refer to conditions that reside outside of the person, such as the job market in a given city or the quality of one's immediate manager. Mining your company's data may reveal that what you thought was driving turnover actually isn'tand that you can quickly intervene in "high-leverage areas, often without significant financial expenditures.

A new relationship between employers and employees requires a different approach to employee retention. Bring in individuals who will thrive in the environment you offer, check in with them often, work with them individually, and use targeted metrics regularly to evaluate your success.